How to determine the carbon footprint of a company
The several droughts and heatwaves in Europe these last few months have shown that the ecological transition is no longer a debate: it is now a necessity.
There are an increasing number of signals that help raise awareness and call for immediate climate action. These include: the spread of wildfires, repeated heat waves, a drastic increase in energy prices, the spread of viruses from wildlife, etc. How can this be stopped? Civil action is essential, but action by firms is all the more crucial!
Several tools to quantify the amount of pollution generated by firms and individuals have been created to react concretely and rapidly. The most widely used is the Carbon footprint, created by the French Resource centre for greenhouse gas accounting.
For a firm, carrying out a Carbon footprint assessment is the first step of a carbon reduction strategy.
This article will present what a Carbon footprint is and the reasons why firms would want this emissions assessment carried out. You’ll learn more about the methodology used and review the steps and difficulties that firms undergoing this process may face.
A few facts
- Carbon footprinting (or carbon reporting) is a framework created in 2004 by the French Resource centre for greenhouse gas accounting aimed at evaluating and reducing greenhouse gas (GHG) emissions;
- Accounting for one’s carbon footprint is now mandatory for firms with over 500 employees, and this every 4 years. This is in line with the Grenelle II article 26 law in France, which requires companies to carry out a GHG emissions assessment;
- The key stages of Carbon footprinting are: emissions framing, identification of sources and emissions, collection of data, calculation and analysis of results, creation of a transition plan and online publication.
What is a Carbon footprint?
In 2004, the French Resource centre for greenhouse gas accounting published a framework for quantifying greenhouse gas (GHG) emissions: the Carbon footprint. This method can be used for a company, a product or an individual.
A Carbon footprint encompasses both direct and indirect GHG emissions of a productive activity. This allows companies to develop an action plan to reduce their GHG emissions.
In France, Carbon footprint assessments are widely used for GHG reporting, as required of firms. Indeed, since the Grenelle II article 26 law, the BEGES is mandatory for companies with more than 500 employees (source in French).
This regulation thus enabled companies to initiate a carbon assessment. What is more, regulations on carbon footprints are proliferating, such as the French laws given below :
- Article 173 of the Energy Transition Law for Green Growth (source in French) requires companies to describe their activities’ carbon footprint in their annual management report;
- Article L. 229-25 of the Environment Code and Articles R. 229-45 to R. 229-50-1 describe the terms of GHG emissions assessment obligations for companies with over 500 employees, needed every four years;
- Article L. 225-102-1 of the Commercial Code requires that the declared non-financial performance report take into account “the social and environmental consequences of the activity, including the consequences on climate change of its activity and the use of the goods and services it produces“. This is compulsory for firms with a balance sheet, turnover or number of employees exceeding certain thresholds set by decree of the Conseil d’Etat (20 million euros balance sheet, 40 million euros turnover or 500 employees for listed companies; 100 million euros balance sheet, 100 million euros turnover or 500 employees for unlisted companies).
- In the same Environment Code, Article R. 225-105-1 stipulates that the report must include information on the most significant GHG emissions generated by a firm, for instance by accounting for the use of the goods and services produced.
Carbon footprinting is increasingly used in France. Since 2006, over 6,500 assessments have been calculated by companies. In addition, a specific carbon assessment tool was developed in 2007 for local authorities.
Why carry out a Carbon footprint assessment?
There are several reasons why you should get your firm’s carbon footprint assessed.
- Firstly, it is compulsory for firms with over 500 employees to carry out a carbon footprint assessment every four years. With the annual Conference of the Parties (COP) agreements and the Paris One Planet Summit in mind, firms have set carbon neutrality as a goal to be achieved by 2050.
- The primary reason for a carbon footprint assessment is to reduce one’s carbon footprint. Indeed, assessments aim at generating awareness and fostering change. Reducing GHG emissions requires a structured approach to decarbonising one’s activity.
- Carrying out a Carbon footprint assessment gives the company the legitimacy to communicate on its GHG emissions and CSR activities.
- Moreover, citizens are increasingly aware of environmental problems and expect firms to make considerable environmental efforts. This can also enhance a firm’s image in the eyes of customers, partners and investors.
- Knowing one’s carbon footprint as a company is the first essential and strategic step to prepare for the next regulatory requirements for protecting the environment.
How is a Carbon footprint calculated?
A Carbon footprint encompasses the following six variables :
- Raising awareness on the greenhouse gas effect, its causes and its consequences on the environment and humanity;
- Defining the scope of a carbon balance study;
- Collecting the required data for the study;
- Exploiting the results of the Carbon footprint assessment:
- Developing a strategy to reduce GHG emissions;
- Implementing this GHG reduction strategy.
A company’s emissions are analysed and divided into scopes. There are three scopes :
- Scope 1: a firm’s direct carbon emissions. For instance, the carbon-intensive resources used by a firm such as boilers, vehicles operated, refrigerant leaks, etc.
- Scope 2: a firm’s direct energy emissions, such as electricity, steam, etc.
- Scope 3: a firm’s indirect emissions such as purchases of goods and services, fixed assets, transportation, use of sold products, etc.
What are the main problems with a Carbon footprint assessment?
The Carbon footprint and – more broadly speaking – carbon accounting is still being specified in several respects.
Paradoxically, although the French economy is becoming increasingly tertiary, a Carbon footprint only measures carbon emissions of products and not those of services (except financial services). Regulations on carbon accounting for services are still lacking.
Surprisingly enough, firms in consulting, digital services, advertising, etc. do not account for their activities’ carbon emissions.
Financial services, on the other hand, must comply with emission calculation regulations. Indeed, if an investor invests in a carbon-intensive firm, they must report the associated emissions. The PCAF standard (Partnership for Carbon Accounting Financials) provides the necessary information to calculate one’s carbon share from an investment.
What are the different stages of a Carbon footprint assessment?
The key stages of a GHG emissions assessment according to the French Ministry of Ecological Transition and the French Resource centre for greenhouse gas accounting are:
- Framing emissions;
- Identifying carbon sources and emissions (identifying sources and sinks of greenhouse gases for each category and item);
- Collecting activity data for each of these sources and sinks at the appropriate level of aggregation. Then, multiplying this activity data by emission or removal factors gives the net greenhouse gas emissions or removals;
- Calculating the balance sheet calculation and analysing it. There are two methods of assessment: measurement and calculation.
- Calculation is the multiplication of the activity data by an emission factor. The data is available in the firm or can be indirectly calculated, giving an approximation.
- Measurement is the multiplication of direct quantities of emitted gases by their respective GWP (Global Warming Potential).
For companies with over 500 employees, measuring the Carbon footprint of their activity is mandatory. This measurement includes the three scopes of pollution: direct, indirect and energy-related emissions. Carbon footprinting is one of the various existing methods to account for one’s carbon emissions.
The Carbon footprint assessment was created by the French Resource centre for greenhouse gas accounting, the most recognised French institution for ecological transition.
However, this Carbon footprinting does have certain limitations, such as not accounting for GHG emissions generated by a firms’ services.
The key steps of Carbon footprint accounting are: the framework of emissions, the identification of sources and emissions, data collection, calculation and analysis, construction of a transition plan and online publication.